decision for the federal reserve. they are expected to raise rates fourth time this year. what we are looking for is the statement. what they say about the future. at bottom fed chairman news conference with jay powell. here is the decision with edward lawrence. reporter: the federal reserve raises interest rates a quarter%. we're in the target range of 2.25 to 2.50%. the federal reserve sees two rate hikes next year, down from three. one more in the year 2020. the fed changed one word in the federal open market committee statement. the one word is some, gradual rate hikes. they will see later on. federal reserve sees long term newt tall 2.8%, down from 3%. federal reserve expects to reach neutral by end of 2019. during the meeting, three federal reserve members moved their projections down. that is changes some of these. the federal reserve sees 3.5%

unemployment for next year. then it starts to tick up just a little bit in 2019. the fed sees lower gdp next year, down from 3% this year. to 2.3% next year. the fed sees inflation inching down. now the federal reserve is also looking at the global risk. they say the global risk is balanced but what is interesting here but is continuing to monitor global economic and financial developments. and assess their implications for economic outlook. that would include not just trade but also a global slowdown of other countries. now the federal reserve will then continue to unwind the balance sheet at the same rate, $50 billion per day. but the headline raises a quarter of a percentage point. the fed sees two rate hikes next year, not three. and one in 2020. back to you, connell. connell: that is the key how many we have going forward. edward lawrence at the federal reserve with breaking news. market selling on the news at least for now after being up

275, 300 points on the dow jones industrial average right before the decision. we're now up 140. we're joined now by the former federal reserve advisor quill intelligence ceo, danielle dimartino booth, from fox business network, kristina partsinevelos is here. point view capital hal lambert joins us and wealth management founder kimberly foss. welcome to all of you. danielle, start with you in studio. anything there that edward reported surprised you? we got quarter-point hike everybody was expecting. the news we get two anticipated rate hikes next year as opposed to three? >> right. the thing that concerns me, the thing markets initially reacting to we're seeing right now, there was no hint of a pause. connell: okay. >> there wasn't that much softening of the language even though they obviously did allude to what is happening out side of the united states. but they left the word gradual in there and gradual is

typically interpreted by the market once a quarter. it is a precommitment to continue hiking rates. i could see the markets could interpret that being hawkish. connell: people look at that and parse these words word by word, chris tina. statement further gradual increases, now quote, some gradual increases, is that your point, danielle? that stays in there, sell on the news, at least? >> that those they're less committal to increasing hikes in the near future that was very important word for them to change going forward. the fact they lowered long-term neutral rate 2.85% from 3. that is some concern they alluded to these global economic slowdowns. the financial, i think he said financial developments too. we're talking liquidity in the market. was surprised there was nothing about the unwinding. the fact that is staying up to par $50 billion per month.

there is the concern. you have two hikes coming up in 2019. the fact they're still reducing their balance sheet. this is a market we haven't seen before. despite strength in the economy, inflation signals, oil is down $47 a barrel. these are concerns. connell: in market, futures market we should point out is pricing in no rate hikes next year. zero coming in to this. hal, get your take. you were not among those rooting, right for the fed to hike rates at all. they do so as expected but your interpretation of that? is there enough in this statement for you? >> no, absolutely not it is a big mistake. i think the fed rate hike is a mistake and the language is really disappointing. they should have moved to data dependent language. to say they will do two rate hikes next year is not enough. the market will sell off, not stop selling off until we get to the close in my opinion. look you have oil prices collapsing.

commodity prices down across the board. there is no inflation. there is no reason to do what they're doing. we have inflation at pc deflator right where they wanted at 2%. it has been that way for years now. basically been unchanged since 2012. like she said just now, the balance sheet is being unwound which has never happened in the history of the country. so we're looking at a december here, markets is down greater than it has been since 1931 in december. you know what was in 1931? the dust bowl. we're looking at unprecedented decline in the stock market. we're not coming off 25 p-e multiples. we're looking at interest rates gone from 3.2% on 10-year to 2.8. the market is telling the fed we're slowing dramatically and stop raising rates. connell: kimberly, your take? >> i think the fed is between a rock and a hard place, right? they sort of had to raise rates to remain independent. that is what is going on, part

of it is going on to save face so they had to save face. the fed needs to practice three fs, fair, firmness, flexibility going into 2019. we had been addicted to this liquidity addiction, right? i think the fed has to maintain this like 12-step process to get us off this addiction to get us back into a healthy economy. so going in and saying two times in 2019, surprise for me one more time in 2020. i'm not sure if that will happen. that is my opinion. our investors are invested 100% across the board in 44 different countries, basically over 12,000 different stocks. we don't worry about timeliness. but have dry powder on sidelines when the dip comes in, you practice the three ds, discipline, diversification,. connell: there you go. how many ds was that?

no. want to bring jonas pharis in the studio to join the panel. market is gyrating as par for the course after we get a decision like this. everybody has their views, hal is probably most aggressive this is mistake way things are worded in the statement. not far off, doesn't take much for market to move. not far off expectations. we expected quarter paint rate hike, we got it. people looking for two rate hikes not three. that's what we got. >> the expectation was raising rates but expectation was coming down in recent weeks particularly. there was a really good article in the "wall street journal," i've been talking about this for a while. they don't need to raise rates anymore. they're create a scary situation where short-term rates are higher than long-term rates. people think that will be recession. whether it causes recession or not doesn't matter. people are scared about it. we saw $50 billion come out of stock fund in a week.

that hasn't happened in a very long time. people are scared there is recession. they can psych themselves up for recession. just because unemployment is 50 year lows, doesn't always mean by some economic text you have runaway inflation. the federal reserve has more power to control inflation than ever before. because they created so much fake money in the last crash, they could start unwinding that faster, complex issue, get into later in the show. doesn't matter if inflation gets ahead of them because they can make it go away and finally ruin a strong economy. only strong here. it is not strong in many other countries. china is having a lot of problems. germany. connell: which they talked about. they talked about the global slowdown. >> if they do one and be done, wall street would be comfortable with that, if they keep doing quarter points there will be problems. connell: looks like they will slow down a little bit next year. the point everybody is making they could be more explicit hey,

we're done for now. we did not get that. >> absolutely. to the point of quantitative tightening shrinking of the balance sheet, there is built-in tightening. for every $50 billion of shrinkage of the fed's balance sheet, this is what the president tweeted about yesterday, every four months we get equivalent of another rate hike flowing into this economy. slowing the economy. people have to be cognizant. whispers on the street, trading desks they would cut quantitative tightening in half, cut 50 billion to 25 billion. markets were hoping for a christmas surprise from the fed. they didn't get it. connell: they didn't get it right, kristina? >> to the fed's defense the fact they used the word some, allowed them to leeway. they can't show they're reacting to markets. they're supposed to be independent. connell: they might have thought they would freak out. hal, what are you going to say? >> i agree they can't react to

equity markets but there is so much more to react to which is not inflation. i think they're more worried about being bullied by president trump. they shouldn't be. that shouldn't be taken into consideration. connell: definitely going to bring that up. you brought it up now. it is interesting, i know a lot of people have divergent views on this, i don't know what yours is, jonas, how the president's tweets and pressure, clearly trying to ininfluence the federal reserve. he says as much. very open about it. i don't know how that affects their thinking or if they would have raised rates without it or not, i don't really know. >> first of all the president was probably right about interest rates. seemed like they were going up too fast and causing a drag. the president is trying to hedge against a recession. connell: looking for somebody to blame. >> federal reserve was living in the 1970s world where normal rate is 5% and would have double-digit inflation to let it get out of control. that world doesn't jive with donald trump's real estate

developing world which more accurately represents the world economy, highly leveraged because of commercial real estate. it only came back because of the last crash. is it unorthodox, no? was he having secret meetings with them like nixon? it wasn't that bad. connell: it was out in the open. it wasn't secret. you can argue whether that is appropriate. we knew what he thought. it wasn't behind closed doors. one second, hal, danielle is nodding, right back to hal. >> optically this question will come up first and foremost in the press conference at 2:30, somebody will ask the question, every single time powell is asked about president trump, seething criticism is non-stops he waltz his way about it. hal? >> first president trump has been right. not only president has done

this. hwb bush complained about the fed after the fact. alan greenspan threw nice recession raising interest rates too much. fed has been wrong a lot. i don't think the fed should go, oh, we've been criticized. we have to go in the other direction. connell: to your point they wouldn't have raised rates at all, hal, is that your point you're saying? >> i don't necessarily know they would have done that but certainly would soften a whole lot more for next year. they have not softened enough. i don't think the markets will like it. connell: by the way dow is going lower. it was up 275, 300, somewhere in the range in the minutes before. kimberly, do you have a take on this, influence if any from the white house. thinking on the fact that hal said, whether rates would have went up whether we would have a softer statement if not for the president's pressure? >> yeah i think there might have been a softer statement but i think that's the problem. the problem is the fed needs to stay independent.

i think that was subconsciously part of the reason they raised rates. because they already said it. set the expectation. you really need to follow through to save face and remain independent. i think that the fed needs to be able to adhere to their dual mandate, 2019. and really don't, really become data dependent again. set the slate clean for 2019 and move forward. ignore the political pressures. that is what they need to do. that is what their mandate is. connell: edward lawrence gave us number at top, among the reporters at the bottom of the hour in the news conference danielle talked about. kristina you're the reporter, no offense to jonas he is analyst, what type of question, some are obvious, wonder what direction the media will take jay powell at bottom of the hour? you're right the president will obviously come up. >> what some term means? two hikes going forward and

2020? what are the factors too are you looking at? labor market tightening? connell: right. >> oil being a major factor too, how is that signifying increase in inflation with oil falling below $50 u.s., that are some of the things i would look at. what economics things are worrying you at the moment give the strong economy for you to go ahead and continue the hikes? and liquidity. that is major factor. liquidity in the market is scary. >> we're seeing some real gyrations in the bond market right now. that should have powell's full attention. he understands the financial markets like none of his predecessors since paul volcker but to your point the thing is they did say that the unemployment rate would continue to decline to 3.5%. that means they're signifying they see the economy as continuing to accelerate and continue to be worried about inflation that is clearly obviously because of oil prices coming down and pressures from

outside of our country. inflation is not a problem. >> there is a lot of reasons they should raise rates, kristina, you brought up assets before. there is no real inflation but there is asset inflation. they are not supposed to watch that, but that is what they're watching, what they cause more in lower rates. check across the internet, they boosted asset prices. a few weeks ago, a few months ago, tech stocks we were on the edge of another bubble, possibly real estate. >> overvaluation for a lot of them, yes. >> they need to get ahead of that and pinch that. they did that. there is no question, that little bubble thing ended. >> within the tech. but -- >> will they cause another recession to nip asset bubble before it gotten out of the control? is this a prick, lending boom bubble, a tech bubble? was the economy about to get too hot in the investing word? not so much in wages, in

enemployment, prices of eggs in the stores, cars, was lending getting too reckless? is that what they were targeting with this? the only other thing you can say made sense what they're doing, you have to sense they're in recession fighting mode when the next recession was. you don't want investors we cut taxes, 1 1/2% fed fund rate how will we get out of this. we got tools. remember we could raise and lower rates. this is psychological benefit to think we have a plan for the next market recession. connell: we'll get set for the jay powell news conference coming up at bottom of the hour. bond market, yield on two year went up a little bit. the 10-year a little bit lower following the rate decision. in the stock market we want to bring gerri willis in. she is on the floor of the new york stock exchange with reaction from there. hey, gerri. >> connell what a reaction in the marketplace. we were up 374 points before the

announcement. plunging as much as 164. now up 31 points. big move in the market. danielle had it right. it is this idea of quantitative tightening that the traders are so concerned with down here. very worried about that. continuing at 50 billion rate a month. they say what they're doing right now. it is creating major problems, major headwinds for the economy. they don't like that one little bit. one trader told me about the idea just right now rate cut which is what we expected. everybody expected a quarter point rate cut. that's what we got. one said to me, gerri, there is no dovish rate hike, right? no dovish rate hike. you can't tell me the fed is making a turn to being dovish when they're increasing rates. a lot of concern down here about this. as you can see, playing out in the market. we're back and forth. the machines are kind of in charge right now as we kind of probably will stumble a little bit into the close.

connell, back to you. connell: we'll see what jay powell has to say for himself in a few minutes as well. gerri, thanks. we'll go back here to the panel. we'll reintroduce everybody very quickly so you know who you're dealing with, i know who i am dealing with, danielle demartin know booth, kristina partsineveloss and joan fast pharis here in the studio. equity investors were not pleased, we didn't get the dovish rate hike a lot of people expected. we saw a narrowing of the spread between short an longer term bond yields as well. and the market reaction, kimberly? >> i mean i think that the this is very, very conducive what the fed said however longer term

that they're invested for the longer term. investors should practice 3 d investing, diversification, discipline, dollar-cost averaging as they markets go through negative territory to buy on discounts. connell: look for bargains here. the dow is up 100 points. back and forth we go. how do we play this? we get that in the federal reserve course of action. what investment angle and strategy in your point of view? >> i don't think markets are expensive. i think it is way overdone as far as the selloff. it has been driven by many people said by a lot of machines out there trading, not

individuals making these decisions. one thing i want to say, i think fed models need to be looked at. seem to think 3% gdp growth is inflationary. they have to stifle the growth down towards 2%. that seems to be an underlying assumption. that is not correct. we need 3% gdp growth for a lot of reasons. as someone said earlier this is not the 1970's. we have real time data, companies have real time data on cost of sales, they can make adjustments quickly. they don't have to wait until quarter end, get the cfo report, oh, my gosh we didn't meet the sales go we thought we were going to have to make adjustments. this is real time. it has been that way basically for the past 10 years. prior to 10 years ago, this type of real time data wasn't there. inflation can be controlled because of productivity. gives us ability to grow a lot faster. connell: do you agree, danielle, that fed is dealing with the old

world, essentially not up to date with data they're using, better ways to look at this the model is broken? >> as former fed insider the model is broken. most antiquated methodology. we read transcripts from 2012. jay powell questioned models. 48% of cfos in the country saying they think the economy will be in recession. he is clearly not speaking to the ceo of fedex, that came out this morning said, global developments are affecting our top line. 40% of standard & poor's 500 revenues come from overseas. i'm not sure how much more proof jay powell needs but he is about to get it when earnings season starts. connell: got it really in the commentary to your point in the last earnings season. fedex more of the same last night. that was kind of a startling number some ways from fedex, maybe shouldn't be, it's a big

company. they said hey things are slowing down everywhere. >> we saw that out of 20 of 30 dow companies currencies is strong headwind going forward. stronger dollar is a concern for people traveling. tightening in the market. strong dollar makes it harder to sell products abroad. that affects price of oil. you talked about the market being too cheap. if you look at some of those factors and warning signs coming from companies and big auto tech, auto companies in the united states laying off employees. why is that happening? a lot in the yield curve, shortened was inverted but the gap between the 10 and the two is narrowing and flattening. aren't those signs of concern for you when you talk about the market going forward and strength in the bull market? >> those are big concerns, i don't disagree with that at all. early cyclicals has had a problem for a while. housing slowed in february this year. autos slowed in february as well. those signs have been there but

with low unemployment we should be able to continue to grow the economy with the consumer. the consumer is the biggest driver of the economy in this country. overseas is a concern. if we stop the liquidity drain by the fed, fed interest rate hikes i think economy can keep growing 2 1/2, to 3% level. if that happens, earnings should be okay for the economy. now individual stocks will have problem. fedex announced it. >> what about consumer debt? you're saying growth by the consumer. if i go to the store can't afford everything, putting everything on my credit card, sure i'm fueling economy and later default and have no money, go personally bankrupt. connell: we're not rooting for that. >> we've seen automobile delinquencies tyke highest since 2011. there is something happening in the household sector data is starting to communicate. they're not all there. connell: what do you think,

jonas? >> easy to tell the fed what to do. i think they're making mistakes, living in the '70s, but i will say it is a leveraged global economy. the last two major recessions were basically because they let asset bubbles build in the economy. they collapsed. they caused serious problems. unfortunately federal reserve policy, federal reserve guys, men and women, when ever they leave the federal government should do more fiscally, so we don't do the heavy lifting lifth the stupid interest rates it is your fault. that is separate issue. they don't want another bubble to build to have a major recession. connell: they don't want to make the same mistakes -- >> have a mild recession to take air out of technology and borrowing, cool things out. if you let it go another two years it will blow up and be just as bad as 08 again. connell: to your point federal reserve is citing on purpose another recession to hope it is mild? that what you're saying? >> only rational things, they're supposed to look at unemployment rate, inflation, those things are fine but the asset thing is

not quite the bubble level in 2007, they're trying to prevent it getting that bad. being in this low, fortunately because assets become a leveraged bet on the economy now, every time you have to slow down the asset bubble you have to cause a mild recession. maybe better than a big recession. connell: imagining edward lawrence in five minutes, mr. chairman, is it true you're trying to create recession here just to see how jay powell would handle that line. >> would not answer that question. connell: a big one by any stretch, it sy bit sy, be honest with us. nothing, kimberly you would go out and talk about, if you weigh the risk of all different outcomes and you're on the board of the federal reserve, maybe it is not the end of the world if the economy slows down to jonas' point, not necessarily that is the idea, but he think that is the rationale, only one he can explain. do you buy that that. >> i'm sorry, connell, i

couldn't hear your question? connell: all right. if you didn't hear the whole thing you will miss out on the answer. i will go to hal on it. the idea that if the federal reserve, if there were bubbles everywhere and federal reserve said you know what? , we wouldn't want economy slowing down and if recession is a result of it could be worse? do you think there is anything into that? >> my first question is where are the asset bubbles we're talking about? we had tech bubble as little high. where is the bubble. connell: that is what he is talking about. >> handful of tech stocks? that shouldn't be the focus of what the fed is trying to do here. >> leveraged loans. >> the leveraged loans, yield on leveraged loans, spread on leveraged loans widened out basically historically now. you could say there is too much in the leveraged loan market. i don't know if i call that necessarily a bubble. that is just a way of financing versus doing high yield. i'm not sure, i mean the bubble

that i saw in the market in my opinion, the main bubble seemed to be in things like esoteric things like artwork. old master paintings and artwork like andy war holes. >> doesn't drive the tech bubble. the money is coming from the trillion dollar market values in the tech area, getting spent on art. not the art is the follow-on bubble. like bitcoin. >> west coast home sales are really taking it on the chin. >> they're trying to get ahead of the bubble. you can't say another 20 or 30 or 40% in nasdaq would have not been a bubble, right? connell: make point, danielle about housing, what were you saying? >> same there are knock-on effects that virtues and good, there are knock-on effects not so good. we saw a ton of weakness in the west coast housing residential existing home sales report. that is where we see weakness, san jose, san francisco, los angeles, home prices declines are accelerating out there. this is outgrowth, an outcome of

so many millions of dollars of wealth being lost on the west coast. connell: back this up for a second as we wait for jay powell. we started all of this agreeing. we're arguing about rationale, right? we're not arguing whether or not the federal reserve should have done what they did? >> shouldn't have raised rates. there is nothing there to cause it. the only reason to do it, issues they're not supposed to be focusing on which is asset prices. which is psychological benefits to say we're not fighting recession. that we have tools. there ising is -- is something there inflation is not that bad. dropping in other countries. oil prices are going down. if it was bad, go to 3% a little while. they're targeting two on average. they can make it go away in a month, burning money they created. they have to sell the portfolio. money comes in, light it on fire. it would cause deflation overnight. like there is no way it can get out of control in the '70s

with their balance sheet. connell: that is exactly right. >> inflation is so much easier to control than deflation. there is no problem having a little bit of inflation here. deflation is more of a concern. connell: you only think they're doing what they're doing, hal, not going with dovish rate hike, everybody expected, not dovish outlook, you think because of presidential pressure? you think they're establishing independence, not to go along with jonas' rationale? >> it is kind of a mystery. i think that is part of it. they have to get some sort of normalized historical federal funds rate. in their mind we have to get to 3% because that's what it always been. there is that kind of rationale. it's a mystery. connell: kimberly had an audio problem. we're sorry, kimberly you missed a great discussion. jump in on why, not whether or not or not, we all had our views

on that, why the federal reserve is going down the path it is going, keep signaling raising rates even though at slower pace? >> i agree with your other guests. i think the fed is absolutely, very my -- myopic what their goal is, normalization by 2019 at 3% rate. if this economy grows and gets a little bit out of control. they have tools in the tool box. connell: i have to cut you off, kimberly. breaking for the federal reserve. here is the chairman, jerome powell. >> pardon me. over the past year the economy has been growing at a strong pace. the unemployment rate has been near record lows, and inflation has been low and stable. all of those things remain true today. since the september meeting of the fomc however some crosscurrents have emerged. i will explain how my colleagues and i are incorporating those crosscurrents into our judgments about the outlook and the appropriate course of policy.

since september the u.s. economy has continued to perform well, roughly in line with our expectations. the economy has been adding jobs at a pace that will continue bringing the unemployment rate down overtime. wages have moved up for workers across a wide range of occupations, a welcome development. inflation has remained low and stable and is ending the year a bit more subdued than most had expected. although some american families and communities continue to struggle and some longer-term economic problems remain the strong economy is benefiting many americans. despite this robust economic backdrop and our expectation for healthy growth we have seen developments signaling softening relative to what we were expecting a few months ago. growth has moderated somewhat around the world in 2018 albeit at still solid levels.

at the same time financial market volatility has increased over the past couple months and overall financial conditions have tightened, that is they have become less supportive of growth. in our view these developments have not fundamentally altered the outlook. most fomc participants have instead modestly lowered their growth and inflation forecasts for next year. the projections of committee participants released today show growth continuing at healthy levels. the unemployment rate falling a bit further next year and inflation remaining near 2%. the projections also show a modestly lower path for the federal funds rate which should support the economy and keep us near our goals. as the economy struggled to recover from the financial crisis and the subsequent recession the committee held our policy rate near zero for seven years to give the economy the best chance to recover. and the economy did recover

steadily if slowly at times. three years ago the committee came to the view that the best way to achieve our mandate was to gradually move interest rates back to levels that are more normal in a healthy economy. today we raised our target range for the short-term interest rates by another quarter of a percentage point. as i have mentioned most of my colleagues expected economy to continue to perform well in the coming year. many fomc participants had expected that economic conditions would likely call for about three more rate increases in 2019. we have brought at that down a bit and now think it is more likely the economy will grow in a way that will call for two interest rate increases over the course of next year. we always emphasize that our policy decisions are not on a preset course and will change if incoming data materially change the outlook. and given recent developments the statement notes that we will continue to monitor global economic and financial developments and assess their implications for the economic

outlook. now i will provide some additional context and detail starting with a review of policy over the last year. last december the unemployment rate was 4.1% and inflation had been running just below 2%. fomc participants and many other forecasters were predicting growth in 2018 would be strong. this growth was predicted to push the unemployment rate down to near historic lows and increasingly tight labor market was expected to help push inflation up to 2%. given this outlook, committee members judged that the appropriate way to sustain the expansion with inflation near 2% was to continue gradually withdrawing the extraordinary support for the economy that had been in place for almost 10 years. thus in december 2017 the median of the projections of fomc participants pointed to three quarter point rate increases in 2018 which would have left the target range for the federal

funds rate at the end 2.25% still at lower estimates longer run rates. in 2018 it became clear economy would be even stronger than expected in part because the fiscal stimulus adopted near the start of the year was larger and most front-end loaded than most anticipated. the signs of a more robust economy proved accurate and the fomc has now raised rates four times this year counting today's action, one more time than anticipated in the median projection a year ago. this illustrates the nature of data dependence that we always emphasize. in 2018 the economy was somewhat more robust than expected and this led to slightly faster pace of policy normalization than had been projected. when the economy has instead turned out weaker-than-expected, the committee has slowed or paused the pace of rate increases as we did in 2016. and when the economy performed as expected the committee

generally moved in line with the median projection as we did in 2017. what kind of year will 2019 be? we know that the economy may not be as kind to our forecasts next year as it was this year. history attests that unforeseen events as the year unfolds may buffett the economy, and call for more than a slight change of the policy projections released today. with that caveat there are two important differences in the policy outlook today versus next year. in early 2018 we saw a rising trajectory for growth. today instead we see a growth moderating ahead. fomc participants along with many other forecasters had long predicted some moderation of growth in 2019. the additional tightening of financial conditions we've seen over the past couple months along with signs of somewhat weaker growth abroad have also led us to mark down growth and inflation projection as bit. the median of fomc participants

projections shows growth of 3% this year and 2.3% in 2019. with growth remaining next year above its longer run normal value the unemployment rate is projected to fall a bit further to 3.5% by the end of 2019. inflation in the median projection remains near 2%. second, the economy has continued to strengthen this year and given our four rate increases and the ongoing reduction in our portfolio, monetary policy will be providing a smaller boost to the economy in 2019. after today's action the target range for the federal funds rate is 2.25 to 2 1/2% putting it at lower end of range ever estimates of longer run normal rate provided by the committee. over the next year if events play out broadly as expected the federal funds rate will be in a range judgments of people both inside and outside the fed will sometimes differ whether regarding stanes of policy is

modestly accommodative, neutral or modestly restrictive. when rates are in the range, the fomc makes policy in light of array of diverse views on the committee. moving forward my colleagues and i will be watching the economy closely for indications this stance of policy is appropriate to sustain the expansion with a strong labor market and inflation near 2%. it is worth noting the summary of economic projections is compilation of individual projections of all fomc participants. we sometimes point to the median of these projections to illustrate the broad middle of views of the committee. each participants projection represents policy under baseline outlook provided by that participants. we believe the sep provide useful information about committee participants thinking but the median is not consensus judgment and certainly does not represent a committee plan. actual policy will as always be

adjusted as incoming data shed light on the state of the economy, the outlook and the changing balance of risks. neither the pace nor the ultimate destination of any further rate increases is predetermined. we will adjust monetary policy as best we can to keep the expansion on track, the labor market strong, and inflation near 2%. we know that our policy decisions affect all american families and businesses. we'll continue to make our decisions objectively and based solely on the best information and analysis. thank you. and i will be happy to take your questions. >> thanks very much. stan fleming from the "the financial times." one of recent surprises is fairly tepid inflation data. explain why extremely tight labor market we're still not saying much in the way of inflationary pressures? in the context of a more data

dependent fed, how will the fed respond to further undershoots of inflation moving into next year? thanks. >> well, you're right, sam. inflation came in touch below where they're expected to be. not a big amount but by a small amount. more broadly 2018 is the strongest year since the financial crisis and during that period, we had low unemployment, and inflation remain ad touch below 2%. so i think that gives the committee the ability to be patient in moving forward. as i mentioned there is significant uncertainty about the both the path and ultimate destination of any further rate increases. >> heather long from "the washington post." today the fed lower ited

expectations for interest rate increases of the given that i'm wondering if the fed had any discussion of altering the course of balance sheet normalization and if you could give us any insight what might lead the fomc to alter that balance sheet normalization in 2019? >> sure. if you go back some years, i think we, people who were working at the fed in 2013 and 2014 took away the lesson that the market cost be very sensitive to news about the size of the balance sheet, pace of asset purchases, pace of runoff, things like that. so we thought carefully about this how to normalize policy and came to the view that we would effectively have the balance sheet run off on automatic pilot and use monetary policy, rate policy to adjust to incoming data and i think that has been a good decision. i think the runoff of the

balance sheet has been smooth and has served its purpose. and i don't, i don't see us changing that. i do think that we will continue to use monetary policy which is the rate policy as the active tool of monetary policy. >> next. then steve. >> thanks. nick timeros of "the wall street journal." chairman powell, you talked a little bit earlier about the ability to be patient. as you think about your next policy moves are you inclined to go the current recent pace to a slightly different destination that's laid out in the projections today? or does the current environment of restrained inflation maybe allow you to space out your next few moves and take more time to get there? >> so, as background i would just point to 2018 being a very strong year and the committee looking forward to 2019, still having what amounts to a

positive forecast. we still are forecasting individually growth a bit above its longer run potential, 2.3% is what we're forecasting. we're forecasting growth will be strong enough that unemployment will drop still further and inflation will remain right near our target. i would say that is reasonably positive forecast. going forward, i will be looking in particular to see whether incoming data tell us we're in fact on that path. that development of the economy is in line with that expectation. that will be the main thing. more broadly though i think we've reached the bottom end of the range of committee estimates of what might be neutral. i think from this point forward we're going to be letting the data speak to us and inform the outlook and inform our understanding what would be appropriate policy. so there's a fairly high degree of uncertainty about both the

path and ultimate destination of any further increases. steve. >> mr. chairman, steve liesman, cnbc, can you tell us how three things affected the outlook for the economy and rates? the first is how the markets decline affected the outlook for the economy and for rates? the second is, trade tensions and tariff war, how you factored that into your outlook and the third is comments by the president urging you not to hike rates? >> so as i mentioned we monitor a broad range ever economic conditions and including financial conditions, a broad range of financial conditions and we took on board the tightening and financial conditions which not any one condition but broadly speaking, financial conditions have tightened since the september meeting really.

so we took that on board in our forecast. that is why the forecast for growth and inflation went down a little bit. but remember, that is in the context of a more accommodative path. so we also took down the rate forecast. we definitely did take that into account. as you can see from the statement language, we acknowledged those risks in the clause about monitoring developments. and we're going to be watching carefully to see as those things develop. i think more broadly there's been a, a sense of concern among business people and market people about global growth, and you know, that may be partly about trade tensions. it may be partly about a variety of things. if you, if you just mechanically drop into a model of the u.s. economy tariffs, you don't see very large effects. the large effects would have to come from market changes, loss of business confidence. those are things very difficult

to model. on your third factor, political considerations play no role whatsoever in our discussions or decisions about monetary policy. we're always going to be focused on the mission that congress has given us. we have the tools to carry it about. we have independence which we think is essential to be able to do our jobs in a non-political way. we are, we at the fed are absolutely committed to that mission. nothing will deter us from doing what we think is the right thing to do. >> nick applebaum, "new york times." you're about to under shoot your inflation target for the 7th straight year. the new forecasts say you're going to undershoot it for the 8th straight year. should we interpret the dot plot suggesting some members of your committee believe policy should be in restrictive range by end of next year? if so, can you help us understand why people would be

advocating restrictive monetary policy at a time of persistent inflation undershoots? >> well, we as a committee we do not desire inflation undershoots and, you're right, inflation has continued to surprise to the downside, not by a lot though. i think we're very close to 2% and, you know, we do believe it is a symmetric, it's a symmetric goal for us, inflation is symmetric around 2%. and that's how we're going to look at it. we're not trying to be under 2%. we're trying to be symmetrically around 2%. i don't, i never said i feel that we achieved that goal yet. the only way to achieve inflation symetricly around 2% is to have inflation semiticly around 2%. we have been close and not gotten there yet and not declared victory on that. so that remains to be

accomplished. >> gina smiley, "bloomberg news." following up on ben's question, if you haven't achieved 2% inflation, and you don't see an overshoot which would be implied by a symmetrical target what is the point of raising rates again at all? >> so again, i go back to the health of the economy, if you look at 2018 this is the best year since the financial crisis. you have both well above trend. you have unemployment dropping. inflation moving up to 2%. we also have a positive forecast as i mentioned. in that context, this, we think this move was appropriate for what is a very healthy economy. policy at this point does not need to be accommodative. it can move to neutral. it seems appropriate be neutral or now at bottom end range of estimates of neutral. that is the basis upon which we made the decision. i think we took on board the risks to that, and you know,

we're certainly cognizant of them. >> marti. then mike. >> mr. chairman, marty kretsinger with ap. you established this coming year a communications panel to look how the fed communicates. could you talk a little bit what you expect to get from that panel and will the dot plot be involved in that at all? how do you think the dot plot is working? are we dealing with it the way that you want us to be handling the dot plot? is it something that you might tweak a bit? >> so this, review, what it really is, it is coming at a time when the economy is strong and it is a good time to take a step back, we think, and ask whether our strategy and our tools and our communications around monetary policy are doing the job that congress has assigned us to do on behalf of the american people. and what we're going to do, is

we're going to open ourselves up, have a discussion with many outside groups, of all different parts of the economy, including a academic conference in june in chicago? again the idea, listen to new ideas, better ideas, old ideas. many of them have been around. trying to assess whether there are better ways to do things. one of the overarching factors rates have been coming down for more than three decades. we may be a in a recalled where interest rates lower for the time-being and we have less policy space to react to economic downturns. we want to be evaluating idea, again for better achieving the goals that congress has given us. we're not looking at law changes at all or not looking to change the inflation target. we're looking for better ways to

achieve the inflation goal, fork, on a symmetric basis. that is the sense of that. as i mentioned about the dot plot, you asked about the dot plot, i think the dot plot generally provides useful information about the reaction function about committee participants, sometimes more useful than others i will admit, but in general i think people sort of have it figured out and understand what it is, what it isn't, that don't mean we don't like to repeat what it isn't. it isn't con send forecast. it is something we each write down and update it as data comes in and we update our outlooks. >> mike, edward. >> michael keefe from bloomberg radio and television. the balance sheet reduction, how much additional tightening do you think has come from that? we note in the markets that the cost of credit rising, commercial paper, repo rates, the ted spread widening. do you see any concerns about the availability or the price of

credit that could slow the markets? and in 2019, we see the economy start to slow, would you, if you don't adjust the balance sheet, be risking too much tightening? >> we do watch all of that, but amount of, the amount of runoff we've had so far is pretty small and if you just run the quantitative easing models in reverse you would get a pretty small adjustment in economic growth and real outcomes. so we don't think, you know, things that are happening at the short run, the shortened are driven by many other factors than balance sheet runoff. example, large bill is up ply pushed up short-term rates, pushed up repo rates. tightening of the federal funds rate raised short-term borrowing costs. we're alert to these issues. we're watching them carefully. we don't see a balance sheet runoff creating significant

problems. >> edward lawrence, fox business network. thank you, mr. chairman. we've seen enormous volatility in the markets recently. the president said don't raise interest rates, that is well-documented. national association of realtors chief economist, starting to affect first-time home buyers with mortgage rates going up. when do you think the pauses need to come in next year? do we need to keep this as you say gradual? in addition what data are you specifically looking at for you when the federal reserve starts to become a headwind in the economy with rates? >> we're watching, we have a strong forecast generally for next year. that forecast involves growth between two and two, 2 1/2%. it involves growth at a strong enough level to continue driving unememployment down, inflation near 2%. so that is a pretty positive forecast. to make further moves i will be looking for data to suggest that is in fact the path we're on. as i mentioned, once you, once

you're broadly speaking in the range of neutral, i think, i think it is appropriate to be putting aside individual estimates of that, and be looking at what the incoming data are telling but the outlook. updating estimate what is neutral might be. natural rate of unemployment might be for the state of the economy. letting that lead you to adjust your outlook, therefore the appropriate path for policy. that's what we mean when you say we're data dependent. we're always data dependent but it has particular meaning in this context which is that. >> hi, mr. chairman. i wanted to ask a, first of all, whether you're worried that president trump's tweeting and statements might interfere with your ability to communicate with markets and why you're doing what you're doing? and then also i was wondering if you can comment governor brainard gave a speech recently

laid out a case for countercyclical capital buffer being activated. do you disagree with her analysis? is that something you think the fed should look at doing? >> i'm not worried about because, on the first question, because i know, everyone who works at the fed knows we'll do our jobs the way we've always done them and that involves, you know, getting the best thinking together, diverse perspectives. we, every business, every fomc cycle we talk to hundreds of people in all different parts of society, not just business people, market people, people from community development organizations. we get survey data from thousands of people. we really do have a pretty broad exposure to what's going on in all different parts of the country. we're going to take all of that information in and we're going to make the best decisions we can and nothing will cause us to deviate from that. in terms of the ccyb, so the ccyb is countercyclical capital

buffer is a tool that allows us to bill capital at a time when have aniabilities, financial stability vulnerabilities are meaningfully above normal. and so that's a tool, absolutely willing to use and happy to use at sufficient time that test is met, we meet and discuss that and evaluate it on a roughly annual basis. we haven't done it since early this year. i think we'll be doing it early next year and we'll be reaching that judgment again. i will tell you i recently gave a speech that i believe financial stability vulnerabilities were roughly at a moderate level. so for me that, but i would want to leave open my mind open on that. have a discussion with my bored colleagues. -- board colleagues. >> from reuters, you said policy does not need to be accommodative but

>> doesn't currently need to be restrictive, no. i don't believe that it is. i don't believe policy is restrictive. >> should it be restrictive next year? >> i discussed this a couple times. very good question. i guess i would just go back to this. the individual forecasts are not something that the committee votes on. they are out in the future. we vote on the rate increase and we write down our, you know, our own personal paths, so people have disparate views on what the end point can be. ultimately it's going to depend on what the circumstances are. there would be circumstances in which it would be appropriate to go past neutral and there would be circumstances in which it would be wholly inappropriate to do so. so i don't -- i wouldn't put too much on -- it does inform you the way people are thinking about things, but i wouldn't take it as a signal about current policy or about

near-term policy. >> thanks for the question. in dallas last month, you talked about the usefulness of speaking with businesses, sometimes hearing things that aren't yet showing nup in the economic dat. i was just wondering if you are hearing anything from businesses that might explain the recent market moves, you know, are markets on to something that again, hasn't showed up yet in the data? thanks. >> so if you look at the teal book or, you know, we get the teal book in person from the reserve bank presidents who come in and share their discussions not just with their directors but with literally hundreds of business and nonprofit, you know, and labor union people around the country, and i personally find it really interesting. my background is very much working starting with, you know, a small group of people, maybe a company, and working out so that

kind of anecdotal data really helps me capture the picture better. you know, what you're picking up now i think is there's, you know, a mood of concern or it's a mood of angst about growth going forward, if i could just capture it in one thought. there are many reasons given for that but generally speaking, it's a concern about is growth going to be as strong as it was, why not, what might it be, different people. but that mood is out there. that doesn't mean that it will come into the real data in a big way. it may, but -- or that financial conditions will tighten further. we just have to see. for now, financial conditions have tightened a little bit. we have taken that on board both in the outcomes in our forecasts and also in a lower rate path to provide some accommodation to push back against that tightening. that's how i think about it. >> greg, then nancy.

>> following up on paul's question, president trump said recently that you should feel the markets so when you see the markets, you know, what are the markets telling you? >> you know, financial conditions broadly speaking, we don't look at any one market. we look at a really big range of financial conditions. what matters for the broader economy is material changes in a broad range of financial conditions that are sustained for a period of time. a little bit of volatility, speaking in the abstract, some volatility doesn't probably leave a mark on the economy. we look for that. you know, what we have seen here is there's been a tightening since right around after -- a week or so after september meeting and that, we tried to factor that into your models of the economy and to the results that